Mouse model systems are used to determine how retroviruses containing nuclear oncogenes can transform hematopoietic cells. The myb-ets- containing ME26 virus encodes a 135 kD gag-myb-ets fusion protein that can bind to DNA. The virus causes a high incidence of leukemia in mice and can induce hematopoietic precursor cells to grow in vitro on the erythroid hormone erythropoietin (Epo). The viral transforming protein was previously shown to transcriptionally activate an erythroid-specific transcription factor, GATA-1, and then to cooperate with the GATA-1 protein to transactivate the Epo receptor (EpoR) gene. Using a selectable ME26 virus, we have examined the temporal changes in the expression of erythroid genes activated by ME26 virus before and after the cells are grown on medium containing only Epo. Both GATA-1 and EpoR genes were found to be activated by the virus before the cells were grown in Epo, although the level of expression of these genes was greatly elevated after the cells had been grown in Epo. In contrast, globin gene expression was not activated in ME26 virus-infected cells until the cells had been grown in Epo for several days. Expression of other erythroid genes, including NF-E2, Spi-1 and Id, were not altered by ME26 virus infection. This suggests that components of the Epo signal transduction pathway may cooperate with the ME26 viral protein to enhance the expression of certain erythroid-specific genes. Constitutive expression of the EpoR gene, however, inhibits viral activation of GATA-1 and globin genes, suggesting that cells expressing constitutively high levels of the EpoR gene express an inhibitor or limiting amounts of a co-factor needed for activation of these genes. Analysis of deletion mutants of the GATA- 1 promoter in transient transactivation assays indicates that the ME26 viral protein is binding to a 391 bp region in the 5' half of the promoter. The ME26 viral protein, unlike the protein encoded by the c- myb gene, does not block chemical-induced differentiation of mouse erythroleukemia cell lines.